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Union of India Vs. Vishkarma Sffllpi and anr. - Court Judgment

LegalCrystal Citation
SubjectLimitation;Arbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 34 of 1973
Judge
Reported inILR1975Delhi788
ActsLimitation Act, 1963 - Schedule - Articles 5 and 119; Arbitration Act, 1940 - Sections 14(2) and 30
AppellantUnion of India
RespondentVishkarma Sffllpi and anr.
Advocates: R.L. Tandon,; G.S. Vohra and; Ajit Singh, Advs
Cases Referred(see Maddala Thathiah v. Union of India
Excerpt:
(i) the limitation act, 1963 - article 119(b)--limitation under--when commences--'notice' envisaged is 'notice' enjoined by section 14(2) of the arbitration act--whether notice given by the arbitrator of making of the award is 'notice'within the meaning of arbitration act, 1940, section 14(2).; that under article 119(b) limitation act, 1963 limitation for having the award set aside does not start until the notice is given by the court. this is so because according to the scheme of the arbitration act the question of setting aside of an award or moving an application to have it set aside or remitted for reconsideration will not arise until and unless the award was filed in court. to determine limitation for the setting aside or remission of the award, thereforee, the notice by the.....s.n. shankar, j. (1) this appeal is directed against the order of the learned single judge dismissing the objections of the appellant, union of india, under section 30 of the arbitration act, 1940 and refusing to set aside the award.(2) in pursuance of an arbitration clause in the contract dated february 6, 1963 entered into by union of india with the respondent firm (hereafter called ''the contractor') in regard to the scheme for development of land east of kailsh for residential purposes- levelling and dressing, the dispute between the parties was referred to arbitration of shri v. v. vaze, arbitrator, in the ministry of works and housing. on june 24, 1972 the arbitrator made an award awarding a total sum of rs. 45.-194.co to the contractor for wrongful termination of the contract by.....
Judgment:

S.N. Shankar, J.

(1) This appeal is directed against the order of the learned single Judge dismissing the objections of the appellant, Union of India, under section 30 of the Arbitration Act, 1940 and refusing to set aside the award.

(2) In pursuance of an arbitration clause in the contract dated February 6, 1963 entered into by Union of India with the respondent firm (hereafter called ''the Contractor') in regard to the scheme for development of land east of Kailsh for residential purposes- levelling and dressing, the dispute between the parties was referred to arbitration of Shri V. V. Vaze, arbitrator, in the Ministry of Works and Housing. On June 24, 1972 the arbitrator made an award awarding a total sum of Rs. 45.-194.CO to the contractor for wrongful termination of the contract by Union of India. On the same date, the arbitrator issued notices to the parties informing them of the making and signing of the award. On July 3, 1972 the respondent contractor requested the arbitrator to file the award in court. In reply by letter dated July 6, 1972 the arbitrator informed the respondent that steps were being taken to file the Award in L Court. By letter dated July 7, 1972 the arbitrator forwarded the original award along with the arbitration file containing documents and pleadings etc. filed before him to the court. He also sent copy of this letter to the parties. The receipt of this copy by Union of India is not denied but it is stated that it got misplaced. On July 24, 1972 Union of India applied under section 14 of the Arbitration Act for directions to the arbitrator to file the award in court. This application, according to the rules of the High Court, came up before the Registrar. On August 3, 1972 the Registrar directed the application to be registered as a suit and issued notice to the respondents for September 18, 1972. The order did not in terms record that the award had already been received in court but required the parties to file objections, if any, to the award within the time prescribed by law. On September 18, 1972 the respondent appeared and stated that he did not wish to file any objections. Counsel for Union of India, on the other hand, submitted that he was not aware of the filing of the award and requested for time to file objections. The matter was adjourned to October 20, 1972. Immediately after this hearing, on the following day i.e. September 19, 1972, Union of India filed objections to the award under sections 30 and 33 of the Arbitration Act along with an application under section 5 of the Limitation Act for condensation of delay in filing the objections. By two separate orders both dated May 9, 1973 the learned single Judge accepted the application under section 5 of the Limitation Act but dismissed the objections and refused to set aside the award. It is the latter order which forms the subject matter of this appeal.

(3) At the outset, Shri G. S. Vohra, learned counsel appearing for the respondent contended that the objections were time barred and should have been dismissed as such without going into their merits. He urged that after making the award, the arbitrator by notice dated June 24, 1972 informed Union of India of this fact and thereafter by copy of the letter dated July 7, 1972 also intimated to Union of India that the award was being filed in court. This, the learned counsel said, sufficiently fixed union of India with a notice of filing of the award and according to Article 119 of the Limitation Act, 1963, objections for setting aside of the award should have been filed within 30 days of the date of this knowledge. He further argued that counsel for Union of India, after making the application dated July 24, 1972 under section 14 of the Act, appeared before the Registrar on August 3, 1972 and the latter explicitly directed the parties to file objections to the award and this, in any case, conclusively amounted to a notice by the court of the filing of the award and the objections filed after the expiry of the prescribed limitation of 30 days on September 19, 1972 were clearly barred by time.

(4) After hearing the learned counsel for the parties, we are unable to sustain these submissions in the facts of this case. Article 119 of the Limitation Act provides thirty days' period of limitation (a) for the filing in court of an award and (b) for setting aside an award or getting the same remitted for reconsideration. In the former case, according to the Article, limitation starts from 'the date of service of the notice of the making of the award'. In the latter case the starting point of limitation is provided to be from 'the date of service of the notice of the filing of the award'. The field of operation of clause (a) and (b) of Article 119 are different. They correspond to sub-sections (1) and (2) of section 14 of the Arbitration Act. According to sub-section (1) of secion 14 when the arbirators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof. The party desiring to have this award filed in court has to move the court thereafter within 30 days of the date of service of notice of the making of the award [vide clause (a) of Article 119 of the Limitation Act] Under sub-section (2) of section 14, the arbitrators or umpire shall, at the request of any party to the arbi ration agreement or any person claiming under such party or if so directed by the court, subject to the conditions laid down in the sub ection, cause the award or a signed copy of it, together with the depositions etc. to be filed in court. The sub-section then requires that 'the Court shall thereupon give notice to the parties of the filing of the award'. Limitation of 30 days prescribed for having the award so filed in court set aside, according to clause (b) of Article 119 of the Limitation Act, starts from 'the date of service of the notice of the filing of the award'. This notice is the notice enjoined by sub-section (2) of Section 14 to be issued by the court intimating the parties 'of the filing of the award'. For purposes of clause (b) of Article 119, thereforee, limitation for having the award set aside does not start until this notice is given by the court. This is so because according to the scheme of the Arbitration Act the question of setting aside, of an award or moving an application to have it set aside or remitted for reconsideration will not arise until and unless the award was filed in court. To determine limitation for the setting aside or remission of an award, thereforee, the notice by the arbitrator of the making of the award is not relevant. Limitation will start only after the court gives the notice of the filing of the award under sub-section (2) of section 14.

(5) This being the position, in law, it is obvious that in this case neither the notice given by the arbitrator on June 24, 1972 that he had made the award nor the service of a copy of the notice dated July 7, 1972 indicating that he was sending the award and the other arbitration records to the court have the effect of starting the period of limitation for filing objections that the award be set aside. The submission, thereforee, that the limitation for objections to have the award set aside should be held to start with effect from the date of service of either of the two atoresaid notices is untenable.

(6) Shri Vohra placed reliance on Nilkanta Sidramappa Nigashetti v. Koshinath Somanna Ningashetti and others : : [1962]2SCR551 All that was held in this case was that the expression 'the date of service of the notice of the filing of the award' did not mean that the notice had to be in writing served in a formal manner. Even an oral intimation of this fact to the counsel was sufficient to constitute notice. The arbitrator in the cited case had already filed the award in court on February 18, 1948. On February 21, 1948, the Civil Judge hearing the suit adjourned the matter to March 22, 1948 for what was mentioned in the order as 'for parties' say to the arbitrator's report'. It was in this context that the court said that the parties knew of the filing of the award and intimation to the pleaders of the parties on February 21, 1948 amounted to service of notice on the parties of the filing of the award. This case is no authority for the proposition that limitation for filing objections for setting aside of the award can start even before the award is duly filed in court or that notice of the filing of the award is not to be given by the court. The learned counsel also sought support from the decision in Kuwalsitigh Akbar v. Baldeosingh Akbar : A.I.R. 1957 Nag 57 In this case also the arbitrators gave their award on October 5, 1950. On January 22, 1951 in the presence of the appellant and his counsel the umpire filed the award in court. As the Presiding Judge was busy the case was adjourned to February 21, 1951. On this date, the umpire was again present and the appellant was directed to pay him Rs. 25 ass costs for filing of the award. Notice was also directed to be issued to the respondent. The respondent on appearance accepted the award. The appellant, on the other hand, requested for time to file objections and after adjournment he filed his objections on April 10, 1951. In this situation an argument was raised that as a specific notice under sub-section (2) of section 14 was not served on the appellant the objections filed on April 10, 1951 could not be said to be barred by time. The contention was repelled and the court observed that where a party is cognizant of the filing of the award, service of notice of the filing of the award is unnecessary and time begins to run under the Article 158 of the old Limitation Act from date when he entered appearance in the proceedings. This case also is of no assistance to Shri Vohra.

(7) We may here record that in para 8 of the judgment in this case there is an observation that section 5 of the Indian Limitation Act does not apply to proceedings under the Arbitration Act but this point was not urged either before the learned single Judge or before us and it is unnecessary to go into this aspect of the question in this appeal.

(8) Coming now to the second contention that the order of the Registerar dated August 3, 1972 directing parties to file objections to the award amounted to notice to Union of India of the filing of the award, we find force in the contention of the learned counsel. But that does not end the matter. In view of the application under section 5 of the Limitation Act, the question for consideration is whether there was 'sufficient cause' in the facts of this case to condone the delay in filing the objections.

(9) Order dated August 3, 1972 requiring parties to file objections, relied upon by Shri Vohra, is in the following terms: 'Present: Mr. G. R. Chopra for counsel for the petitioner. This is an application under Section 14 of the Arbitration Act, 1940. Let it be registered as suit and notice shall be issued to the respondent No. 1 to file objections to the Award if any within the prescribed period in the ordinary manner as well as through registered A. D. post. The petitioner may do the same if so advised. Process-fee and necessary postal envelope within 5 days. Put up on 18th September'.

(10) Union of India had engaged Shri R. L. Tandon to appear on its behalf. The order would show that Shri G. R. Chopra appeared before the Registrar on August 3, 1972.

(11) In support of the application for condensation Union of India filed affidavits of Shri G. R. Chopra as well as Shri R. L. Tandon. Shri Chopra in his affidavit dated November 29, 1972 stated that on August 3, 1972 he was present before the Registrar to attend to one of his own cases and as Shri Tandon, counsel for Union of India, was busy before another Bench, at the request of the clerk of Shri Tandon he put in appearance when the case was called and later when he met Shri Tandon he told him that notice of the application that came up before the Registrar had been ordered to be issued for September 18, 1972. He categorically stated that he did not come to know that the award had been filed and that he understood the order of the Registrar to be only an order for issuance of notice of the application. In answer, the proprietor of the respondent-firm, filed a counter affidavit staling that he was present at the time when the case was taken up and that Shri Chopra requested for time to file objections within his hearing. To this, Shri Chopra filed another affidavit and reiterated his previous statements. The proceedings of the day do not record the presence of the proprietor of the respondent and we have no reason to disbelieve the statement made by Shri Chopra that he simply appeared for Shri Tandon and that he understood the order of the Registrar to be that of issuance of notices in regard to the application under section 14 and that this was all that he communicated to Shri Tandon when he met him later. This statement of Shri Chopra is supported by the affidavit of Shri Tandon and this is further borne out by the subsequent conduct of the counsel on record. On August 7, 1972 the counsel filed process-tee for issuance of notice of the application not only to the respondent to the application (respondent herein also) but also to the arbitrator. The notice to the arbitrator was obviously for the purpose of securing directionss for the filing of the award in court which indicates that the counsel did not know that the award had already been filed. The evidence, to our mind, makes out a genuine case of condensation for consideration by the court under section 5 of the Limitation Act.

(12) In Krishna v. Chathappan : I.L.R. 13 Mad 269 the Court held that Section 5 of the Limitation Act gives a discretion to the Court to be exercised judiciously upon principles which are well understood and the word 'sufficient cause' occurring therein has to receive a liberal construction so as to advance substantial justice when no negligence or inaction nor want of bona fides is imputable to the party invoking it. This principle was endorsed by the Supreme Court in Ramlal and others v. Rewa Coalfields Ltd. : [1962]2SCR762 of the report and again reaffirmed in Shakuntala Devi lain v. Kuntal Kumari and others : : [1969]1SCR1006

(13) In Lala Mata Din v. A. Narayanan : [1970]2SCR90 in the context of condensation of delay emphasis was again laid by the Supreme Court on the bona fides of the applicant. In that case, as in the present one, condensation was sought on the ground of bona fide mistake of the counsel and the prayer was accepted. Hidayatullah, Chief Justice, speaking for the Court said :

'IT is always a question whether the mistake was bona fide or was merely device to cover an ulterior purpose such as latches on the part of the litigant or an attempt to save limitation in an underhand way. The High Court unfortunately never considered the matter from this angle. If it had, it would have been quite clearly that there was no attempt to avoid the Limitation Act but rather to follow it albeit on a wrong reading of the situation'.

(14) We have no doubt in our mind that in this case a bona fide mistake occurred due to which Union of India could not file objections earlier. The facts proved make out a 'sufficient cause' within the meaning of Section 5 of the Limitation Act, 1963 for condensation of delay as held by the learned single Judge. Accordingly, the objection of Shri Vohra that the objections filed by Union of India deserved to be dismissed as time barred is repelled.

(15) Coming now to the merits, briefly the facts arc that after the contract entered into on February 6, 1963 between the Union of India and the Contractor, the Divisional Officer in pursuance of clause 30 of the contract by letter dated March 2, 1963 terminated it and asked the contractor to stop the work immediately. The respondent claimed that this termination was illegal and he was entitled to damages for this wrongful breach of the contract. The arbitrator accepted this contention and held that the contract was a 'lump sum contract' and Union of India could not 'take shelter under the aegis.aegis of clause 30 of the contract' to terminate it. He gave a speaking award on this question and awarded a sum of Rs. 45.494.00 to the contractor by way of damages for the breach of the contract by union of India. Clause 30 on which the Union of India relied is specifically referred to in the award and reads as under :

'IF any time after the commencement of the work the President shall for any reason whatsoever not require the whole thereof as specified in the tender to be carried out, the Divisional Officer shall give notice in writing of the fact to the contractor(s) who shall have no claim to any payment or cmpensation whatsoever on account of any profit or advantage which he/they might have delived from the execution of the work. in full[, but which he/ they did not derive in consequence of the full amount of the work not having been carried oui neither shall he/ they have any claim for compensation by reasons of any alteration having been made in the original specifications, drawings and instructions which shall involve any curtailment or increase of the work as originatly conleinplated'.

(16) Only objection to the award pressed bdore the learned single Judge and canvassed before us is that there is an error apparent on the face of the award inasmuch as the arbitrator has misconstrued clause 30 of the contract and has thereby arrived at a wrong conclusion. The learned single Judge has repelled this objection and has held that the clause was in the nature of exemption or exclusion clause and could not be invoked to defeat the contract which the parties, when they entered into it, intended and agreed to be performed. The learned single Judge has observed that the clause had to be construed so as to give it 'business efficacy' and to give effect to the presumed intention of the parties and that it was not intended to enable nullification of the contract.

(17) Couclusion in the award that clause 30 could not be construed to authorise Union of India to terminate the contract is based on the finding that the contract in question was 'lump sum contract' or a final negotiated concluded contract. Shri G. S. Vohra, appearing for the contractor referred to para 5 of the claim iled before the arbitrator where it was alleged by the contractor that it was a lump sum agreement and then to the reply to the claim filed by Union of India where this averment was not denied ; and argued that it was an admitted case of the parties before the arbitrator that the contract in question was a lump sum contract. To see if there is an error apparent on the face of the award it is not permissible to refer to pleadings or any other document not incorporated in the award itself. We need not, thereforee, embark on the decision of the merits of this controversy for ourselves. The award itself is clear on this point and says :

'THEinstant contract was a lump sum contract wherein the 'negotiated lump sum cost of Rs. 4,99,934' was accepted by the respondent vide their letter dated 10-1-1963 (page I of the contract document)'.

(18) Wrong or right this decision of the arbitrator is final. The arbitrator was a Tribunal chosen by the parties. Merits of his finding that it was a negotiated lump sum contract cannot be agitated by Union of India in these proceedings. This Court cannot exercise appellate powers over this finding of the arbitrator; (See Union of India v. A. L. Rallia Ram : : [1964]3SCR164 )

(19) In M/s. Alien Berry and Co. Private Ltd. v. The Union of India : : [1971]3SCR282 ((r)) the Court has held that after the parties have chosen their own arbitrator they cannot, if the award is good on the face of it, object to the decision either upon the law or the facts. thereforee, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake. The same principle was affirmed in the Upper Ganges Valley Electricity Supply Co. Ltd. v. The U. P. Electricity Board : : [1973]3SCR107 .

(20) The question for decision, thereforee, is whether a term like condition No. 30 in the instant case could be invoked to terminate a negotiated lump sum contract which, in other words, means nothing other than a concluded contract between the partics. Distinction in such a case has to be made between a concluded contract and a continuing contract like a contract of domestic service or a contract of partnership. (See Maddala Thathiah v. Union of India : AIR1957Mad82 ) which later on appeal also came up before the Supreme Court and has been referred to by us in the latter part of the judgment. The learned single Judge has held that on a true interpretation when there was a concluded contract this term could not be so invoked.

(21) There was no challenge to the finding of the arbitrator that in the instant case it was a negotiated lump sum contract between the partics.

(22) The arbitrator, it was also not disputed before us, had the jurisdiction to interpret the contract and for that purpose to construe the clause in the context of the whole contract. As we look at the award, in constructing the contract he has adopted the unexceptionable rule of construction that the intention of the parties must be given effect to. The construcion placed on clause 30 by the arbitrator is qite reasonable and is supported not only by the English authority referred to by the learned single Judge but also by decisions of courts in India.

(23) In Dalmia Cement Company v. A.S.G. Lourdusami Pillai: : (1943)1MLJ303 , tenders were invited by the defendant Company for construction of a factory and for subsidiary buildings in connection with their new cement works. plaintiffs' tenders were accepted. A concluded contract thus came into being between the parties. A lay out Plan was sent by the Company and the plaintiffs began excavations in accordance with the contract. The original tender had been accepted for construction by use of granite jelly for mass concrete etc. but later the Company wanted it to alter it into limestone jelly and offered fresh terms to the plaintiff to which the latter did not agree. The contract contained a term No. 25 which was similar to clause 30 in the present case. Clause 25 in that contract empowered the company at any time after the commencement of the work for any reason to give a notice in writing to the contractor in case the Company did not require whole or part of the work to be carried out and in that event the contractor was stipulated to have no claim to any payment of compensation whatsoever on account of proprietary or other advantage which he might have derived from the execution of the work in full but which he did not derive in consequence of the full amount of the work not being carried out. Notice under clause 25 was accordingly issued to the contractor and the contract was terminated. The contractor filed a suit for breach of the contract. Clause 25 was pleaded in defense. The Court held that the words 'not required' in clause 25 were meant to convey a set of circumstances when the Company did not intend to continue the contract on the ground that it did not require the whole or part of the building for which the contract was given to the plaintiff but could have no application to a case where the Company wanted those very buildings but built of a different material and at lower rates. The position in the instant case was substantially the same before the arbitrator.

(24) Civil Appeal 53 of 1961, Union of India v. Maddulu Thatilialt decided by the Supreme Court on May 9. 1963 was an appeal from the judgment of the Madras High Court in the case reported as : AIR1957Mad82 that we have referred to earlier. In this case the tender form contained a note which was meant for the quantity required and described dates of delivery. The note read as under:

'THISadministration reserves the right to caned the contract at any stage during the tenure of the contract without calling tip the outstandings on the unexpired portion of the contract'.

(25) The lender with this note was accepted. At the end of the temsand conditions also there was a note that the Administration reserved the right to cancel the contract without calling up the outstandings on the unexpired portion of the contract. The contract was, thereafter. cancelled. In the suit for recovery of damages on the basis of breach of this contract by the contractor, the defense taken was that right to cancel the contract at any stage was reserved to the defendant. Union of India and, thereforee, the contract could be cancelled without giving any reason at the discretion of the defendant without making itself liable- to pay any damages. Madras High Court dealing with this clause said that a continuing contract may contain a provision making it determinable at the option of one of the parties upon certain terms, but in the case of a concluded contract the law docs not permit one of the parties to say that there is no contract subsisting or enforceable. In answar to the argument that the clause existed in the contract and it conferred an absolute and unfettered right to the Administration the Court said that 'we have no hesitation in holding that this clause is void and unenforceable' (see Maddala Thathiah v. Union of India : : AIR1957Mad82 . In appeal the Supreme Court endorsed this conclusion though with a slight different reasoning.

(26) The arbitrator in the award has taken the same view. Para 10 of the award reads as under :-

'Aclause framed in extravagantly wide terms may be limited or disregarded it it would defeat the very object which the parties had in. view. Although the exemption clause, on the fact of it, could heardly have been more comprehensive it must at least be modified so as not to permit the party to disregard its fundamental obligation. Otherwise he would in fact be able to say 'I will only perform if I feel like it'.

(27) Proceeding further, in para 11, the arbitrator on the basis of observations in Suisxe Alluiltique Suciele D'Arment MaritimeS. A. and N. V. Roileniunische Kolen Cewi-ule : (1967) I.A.C. 361, on page 432, has said :

'ONEmay safely say that the parties cannot, in a contract, have contemplated that a clause shall have so wide an ambit as in effect to deprive one party's stipulation of contractual forces: to do so would be to reduce the contract to a mere declaration of an intent'.

(28) For all the reasons aforesaid, in agreement with the learned single Judge, we find no error in the view taken by the arbitrator to merit the setting aside of the award.

(29) Shri Tandon argued that the arbilator in this award, while holding that the clause could not be invoked to terminate contract, has himself said that this clause is not void or otiose and that the same could be invoked but only in cases of marginal or at any rate not substantial deviations of the contracted quantity. This finding, the 'earned counsel said, was inconsistent with the finding that the clause could not be invoked for terminating the contract and so there was an error apparent on the face of the award which called for its being set aside. We are unable to agree. What the arbitrator has held is that in the facts of this case where only a small part of the contract work had been done (4.8 per cent of the whole), Union of India was not entitled to invoke clause 30 to terminate the contract and as such the termination was illegal and unjustified and the contractor was entitled to damages awarded to him. The award of damages is not based on' that part of the award which deals with the circumstances under which the clause will be operable but on the finding that termination of the contract by taking recourse to clause 30, in the facts of this case, was illegal and unjustified. Even if that part of interpretation of the clause which says that the clause is not void or otiose be not correct, regarding which we say nothing, that will not entitle us to set aside the award. The submission, thereforee, has no merits.

(30) Shri Vohra also tried to support the award on the ground that apart from the effect of clause 30 the respondent was entitled to the damages awarded by the arbitrator as the contract had not been cancelled by an authority competent to do so. His submission was that even though the Divisional Officer issued the notice as envisaged in clause 30 but it was in fact the President who had to be satisfied about the matter. This argument appears to have been urged before the arbitrator also but, as read the award, the submission did not find favor with him. We do not think that it is open to Shri Vohra to assail any part of the award without filing objections to it. It is, in any view, unnecessary for us to go deeper on this aspect in view of the conclusion that we have already reached.

(31) For reasons aforesaid, we find that there was no error apparent on the face of the award. This appeal is accordingly dismissed but in the circumstances of the case parties arc left to bear their own costs.


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